Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, January 20, 2017

Article on Gig Employees & Their Retirement Benefits

Gig economyPaul M. Secunda recently published an Article entitled, Uber Retirement, U. Chicago Legal Forum (2017). Provided below is an abstract of the Article:

The rise of the gig economy with its part-time, itinerant, independent workers, in conjunction with the employee-centric nature of occupational retirement benefits under ERISA, has led to gig employees largely lacking meaningful retirement benefits. Current proposals to provide portable benefits to gig workers as independent workers or independent contractors are unacceptable because such benefits would not be secured by the fiduciary consumer protections of ERISA. 

However, two developments with regard to the retirement security of the gig workers are promising. First, there is now increasing examples of gig workers being found to be common-law employees under tests like ERISA’s Darden test. As common law employees, gig workers are entitled to the reporting and disclosure, vesting, funding, and fiduciary protections of ERISA. Second, the use of an open MEP model, in which pooled employer plans (PEP) have a pooled plan provider (PPP) as the named fiduciary, are gaining growing bi-partisan acceptance. This article encourages Congress to promptly adopt the open MEP model, free of current regulatory restrictions, so that gig employees can enjoy retirement security with the peace of mind that ERISA fiduciary protections provide under industry-wide gig employee open MEPs.

 

January 20, 2017 in Articles, Current Events, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Wednesday, January 11, 2017

Article on Fiduciary Duties in 2017

Fiduciary 2016Gail E. Cohen recently published an Article entitled, In Like a Lamb, Out Like a Lion: For Fiduciaries, 2016 Started Out Quietly, but 2017 Promises to Be a Wild Ride, Tr. & Est. 28 (Jan. 2017). Provided below is a summary of the Article:

The year 2016 started out quietly, seemingly a continuation of the status quo. We continued acting as fiduciaries of trusts that took advantage of tried and true tax strategies. Professional fiduciaries received good news in April when the Supreme Judicial Court of Massachusetts overturned the troubling Pfannensitehl decision of 2015, thereby providing assurance that discretionary trusts weren’t subject to claims of divorcing spouses in Massachusetts. Later in the year, as expected, the Internal Revenue Service put forth long-awaited proposed regulations intended to curtail the use of valuation discounts in gift and estate planning for family entities. 

Then came Donald J. Trump. Seemingly everyone expected Hillary Clinton to win the presidency, thereby continuing the status quo, albeit with higher income taxes and higher estate and gift taxes (or at least a lower exemption from those taxes). Up until the election, there was a flurry of activity to take advantage of valuation discounts prior to the Internal Revenue Code Section 2704 regulations becoming final. Now, we don’t know exactly what 2017 will bring. 

A few items to watch: lower income tax rates; elimination of gifts of appreciated assets to private charities; elimination of estate and gift taxes and presumably the generation-skipping transfer (GST) tax; income tax at death or carryover basis; and non-adoption of the proposed IRC Section 2704 regulations. Looking ahead, we should examine the potential impact that these actions may have on professional fiduciaries. 

 

January 11, 2017 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Professional Responsibility, Trusts | Permalink | Comments (0)

Monday, January 2, 2017

Article on Intersection of Contract and Fiduciary Law

Contract law2Paul B. Miller & Andrew S. Gold recently published an Article entitled, Introduction to Contract, Status, and Fiduciary Law (2016). Provided below is an abstract of the Article:

Contractual and fiduciary relationships are the two primary mechanisms through which the law facilitates coordinated pursuit of our personal interests. Contract and fiduciary law are fields often represented in oppositional terms. Many believe that while contract law allows individuals to pursue their interests independently, fiduciary law allows them to pursue their interests in a dependent or interdependent way. This view seems to suggest that the boundaries between contract and fiduciary law are fixed rather than fluid. 

Bringing together leading theorists to analyze important philosophical questions at the intersection of contract and fiduciary law. Contract, Status, and Fiduciary Law demonstrates that popular characterizations of the relationship between contract and fiduciary law are overly simplistic. By considering how contract and fiduciary law interact, and not just how they differ, the contributors to this volume offer new insights into a range of topics, including: status relationships, voluntary undertakings, duties of loyalty, equity, employment law, tort law, the law of remedies, political theory, and the theory of the firm. 

This introductory essay provides an overview of the contributions to the volume, indicating their significance for our understanding of relationships between contract and fiduciary law.

 

January 2, 2017 in Articles, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Monday, December 19, 2016

Case Summary on Will Beneficiary's Cause of Action Against Drafting Attorney

Will contest prPROFESSIONAL RESPONSIBILITY: Disappointed will beneficiary has a cause of action against the drafting attorney as a third-party beneficiary. The testator instructed her attorney to draft a will leaving her estate to her mother and if her mother predeceased, to a named charity. The mother predeceased but subsequent litigation determined that her will gave only tangible personal property to the charity and failed to dispose of her real property which therefore passed through intestacy to her heirs. The charity brought an action against the attorney on a third-party beneficiary theory and prevailed both at trial and on appeal to the Virginia Supreme Court. In Thorsen v. Richmond Society for the Prevention of Cruelty to Animals, 786 S.E.2d 453 (Va. 2016), the court held that under Virginia common law, third-party beneficiaries can sue on oral contracts; that the applicable three-year statute of limitations begins to run on the testator’s death, and that the evidence was sufficient to show the testator contracted with the lawyer to draft a will benefitting the testator’s mother and the charity. One justice dissented arguing that abolition of the common law privity requirement is a policy issue to be decided by the legislature and not by the court.

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

 

December 19, 2016 in Estate Planning - Generally, New Cases, Professional Responsibility, Wills | Permalink | Comments (0)

Saturday, December 17, 2016

Case Summary on Succession of Fiduciary

Succession fiduciaryPOWER OF ATTORNEY: A successor agent is not a fiduciary until succession is effective. An Illinois intermediate appellate court in In re Estate of Shelton, 60 N.E.3d 121 (Ill. App. Ct. 2016), affirmed the trial court’s dismissal of an action alleging that the successor agent under a power of attorney breached the agent’s fiduciary duties owed the principal because until the successor becomes the agent, no duties arise and the certification of the incompetency of the original agent which would trigger the succession was not made until after the alleged breach.

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

 

December 17, 2016 in Current Events, Estate Planning - Generally, New Cases, Professional Responsibility | Permalink | Comments (0)

Wednesday, December 14, 2016

Article on Contractual & Fiduciary Relationships

FiduciaryPaul B. Miller & Andrew S. Gold recently published an Article entitled, Introduction to Contract, Status, and Fiduciary Law (2016). Provided below is an abstract of the Article:

Contractual and fiduciary relationships are the two primary mechanisms through which the law facilitates coordinated pursuit of our personal interests. Contract and fiduciary law are fields often represented in oppositional terms. Many believe that while contract law allows individuals to pursue their interests independently, fiduciary law allows them to pursue their interests in a dependent or interdependent way. This view seems to suggest that the boundaries between contract and fiduciary law are fixed rather than fluid. 

Bringing together leading theorists to analyze important philosophical questions at the intersection of contract and fiduciary law, Contract, Status, and Fiduciary Law demonstrates that popular characterizations of the relationship between contract and fiduciary law are overly simplistic. By considering how contract and fiduciary law interact, and not just how they differ, the contributors to this volume offer new insights into a range of topics, including: status relationships, voluntary undertakings, duties of loyalty, equity, employment law, tort law, the law of remedies, political theory, and the theory of the firm. 

This introductory essay provides an overview of the contributions to the volume, indicating their significance for our understanding of relationships between contract and fiduciary law.

 

December 14, 2016 in Articles, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Monday, December 12, 2016

Article on Fiduciary Duties & ESG Investing

Fiduciary duty esg2Susan N. Gary recently published an Article entitled, Values and Value: University Endowments, Fiduciary Duties, and ESG Investing, 42 J. C. & U. L. 247 (2016). Provided below is an abstract of the Article:

The trustees managing university endowment funds must comply with fiduciary duties that require the trustees to act in the best interests of the university and to act as prudent investors when managing the funds. This article shows that these fiduciaries may adopt investment policies that consider material environmental, social, and governance (ESG) factors as part of an overall investment strategy. The article explains why older arguments that fiduciaries should avoid “social investing” are no longer relevant and how the prudent investor standard has evolved to include ESG investing. The article discusses the changes in socially responsible investing since the anti-apartheid era and reviews a significant number of empirical studies that show that ESG investing has had a neutral or positive effect on financial return. Based on the empirical work, evidence of the financial industry’s growing use of extra-financial factors in investment analysis, and recent guidance from the Department of Labor, the article concludes that a trustee responsible for a university endowment will not breach the duty of loyalty or the duty to act as a prudent investor by directing the endowment’s use of ESG investing as part of an overall financial investment strategy.

 

December 12, 2016 in Articles, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Friday, December 2, 2016

What Happens When Your Husband Hides His $400 Million Fortune?

Hiding moneySarah Pursglove decided to take a deeper look into her husband’s finances when the Finnish entrepreneur left her. Robert Oesterlund swore in court that his fortune only totaled a few million dollars, but Pursglove could think of several family purchases that cost above and beyond that amount. She flew to the Bahamas to figure out what her husband was really worth. There she found an accounting statement that claimed Oesterlund was worth at least $300 million. As she packed her bags for the flight back home, her family’s fortune immediately began disappearing into various shell companies, bank accounts, and trusts under a worldwide financial system catering to the ultra rich. The system effectively offshores wealth and makes the richest people appear to own very little.

Over the next two years, Pursglove would rely on her wealth squad to untangle the defenses of the offshore financial world. It all started when Oesterlund created his businesses and was subsequently looking to avoid costly taxes. Eventually, he set up a Cook trust, suggested by his corporate counsel, who assured him he would be “untouchable.” As Pursglove’s lawyers began to figure out the scheme her husband was surmounting, they filed court documents for a divorce and to impose a sweeping asset injunction, which would prohibit Oesterlund from selling, merging, or borrowing against any of his assets and additional offshoring. The corporate fraud lawsuit proceeded in Florida, where the family’s companies were being run. It was eventually discovered that Oesterlund was using a Bahamas-based company to transfer all his assets and avoid all United States tax liability—a tactic referred to as “transfer pricing.” Pursglove’s attorneys claimed that Oesterlund began to shield assets from his wife as the divorce loomed near. Shortly after a judge ruled that Pursglove could see thousands of her husband’s documents, both sides’ lawyers met and discussed the possibility of Oesterlund going on the run if he had to fork the documents over. Consequently, this brought things to a head. Oesterlund would have to expose himself or threaten his fortune. Oesterlund’s one-time allies were now becoming his enemies to avoid fighting the greater good—the system. The wall of secrecy around Oesterlund’s accounts began to crumble. The case still remains open and the outcome is unknown, but it begs the question: is there justice in wealth battling wealth?

See Nicholas Confessore, How to Hide $400 Million, N.Y. Times, November 30, 2016.

December 2, 2016 in Current Events, Estate Administration, Estate Planning - Generally, Income Tax, New Cases, Professional Responsibility, Trusts | Permalink | Comments (0)

Tuesday, November 29, 2016

Article on Third-Party Liability in Equity

Trustee2Sarah Worthington recently published an Article entitled, Exposing Third-Party Liability in Equity: Lessons from the Limitation Rules, Equity, Trusts and Commerce Ch. 14 (Forthcoming). Provided below is an abstract of the Article:

This article provides a re-examination of third-party liability in equity. The exercise was prompted by a difficult case on limitation periods in equity, but the conclusions – if correct – have far wider significance. Three major points are made. First, it has long been conceded that the language of constructive trusts and constructive trustees is confusing. It is suggested here that the language disguises a relatively straightforward search for situations where there are property splits (trusts) or property management responsibilities (fiduciary responsibilities). Secondly, accessory liability in equity looks to be something of a misnomer, since it appears that the drive is not to find individuals with particular associations with the wrongdoer and shared liability for the primary wrong, but instead to find individuals who are themselves trustees or fiduciaries because of their particular association with the original managed property. Liability follows accordingly, and is primary not secondary liability. Finally, where there are fiduciary responsibilities for property management, liability is in two forms: compensation for loss to the managed assets; and disgorgement of disloyal gains. The former is distinguishable from common law compensation in its focus on remedying loss to the property fund, not the loss to individuals interested in the fund. These insights – in particular the fiduciary characteristics of third parties in equity, and the workings of equitable compensation – have significant practical consequences.

November 29, 2016 in Articles, Estate Administration, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Friday, November 18, 2016

Why Are Corporate Fiduciaries Distancing Themselves from Special Needs Trusts?

Special needs trustSpecial needs trusts have been a way for disabled individuals to remain eligible for means-tested federal benefits. More institutional support is necessary to manage these funds; however, corporate fiduciaries are distancing themselves from this specialty. Four reasons for this move include increased litigation and regulatory issues; profitability concerns; lack of experience; and lack of time and resources. In order to alleviate these concerns, fiduciaries should start expanding their education through conferences and CLEs. Further, attorneys should ensure that their fiduciary referrals are informed, looking for expertise to navigate legal and regulatory issues.

See Peter J. Johnson, Corporate Fiduciaries Are Shying Away from Special Needs Trusts, Wealth Management, November 15, 2016.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

November 18, 2016 in Disability Planning - Health Care, Elder Law, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)